Unit 06: Introduction to Finance

Scenario

Each task has its own scenario for this assignment

Task 1 of 2 Discussion with a friend

Scenario

A friend of yours is eager to start his business (a Florist). Your friend has saved 10,000 but knows that a minimum of 30,000 is needed to start the business.

Instructions

You are to give advice to your friend regarding possible financial sources to raise the remaining 20,000.00 and explain what consequences will each option bring in terms of control and in terms of financial cost as well as the effect on the balance sheet, ultimately recommending one or 2 methods.

You should also explain to your friend that in order to obtain the necessary funds, the stakeholder bank, investors, etc.) will need some information before releasing the funds and explain to your friend what each stakeholder will need. Discuss also the importance of financial planning to ensure that the funds are properly utilise in the business.

You should make a table/notes for your friend to understand the options better.

Submission

Copy of your table/notes

Task 2 of 2 Decision Making Exercise

Instructions

Scenario

Mr. Neil Down is a sole trader and owns WoodyTrain, a toy store specialising in handcrafted wooden train toys. Mr Neil wants to raise 20,000 by getting a new partner.

Instructions

Analyse the types of business budgets that Mr Neil Down may have prepared for this business organisation. Recommend how these budgets would allow a new partner to make an informed decision about investment.

Explain the different methods Mr Neil Down could use to calculate the unit cost of the handcrafted wooden train toys.

Compare the format of the financial statements that Mr Neil Down will currently prepare for his sole trader business with those prepared for a partnership and limited company.

WoodyTrain has been asked to supply a large number of toys to a large retailer at a

discounted price of 50%. Advise Mr. Neil Down on what he needs to consider before replying

to the retailer. 5. WoodyTrain is considering expanding and purchasing a new toy store. Two new stores are

being considered Toy Store A and Toy Store B. The following are the estimated cash flows for each building.

Year

0 1 2 3 4

Toy Store A Toy Store B

-375 000 200 000 110 000 220 000 130 000

-425 000 200 000 150 000 300 000 250 000

The cost of capital is 12%. The extract from present value tables of 1 @ 12%:

Year 1 Year 2 Year 3 Year 4

REQUIRED:

0.893 0.797 0.712 0.636

o Calculate for each building: Payback

Net Present Value

o Recommend and justify, based on your financial analysis, which Toy Store, WoodyTrain should purchase.

5. For this task, you are employed as an adviser to a team of Toy Store Owners. For research, you should review the published accounts of Hamleys Group Limited (Toy Store), which can be downloaded from https://beta.companieshouse.gov.uk/company/02352435/filing-history

You are required to prepare a business report that includes the following:

1. An evaluation of the financial statements of Hamleys Group Limited. You should evaluate the structure, format and requirements of their published accounts.

2. A description of how the following ratios could be used by organizations, such as Hamleys Group Limited and their stakeholders. You should consider the following ratio groups:

a. Profitability b. Liquidity c. Efficiency d. Capital

e. Investor

Delivery and Submission

1x Answer to all the questions

Summative Delivery and Submission

Evidence generated for activities 1 and 2

Indicative word count 2500